[Congressional Record (Bound Edition), Volume 147 (2001), Part 10]
[Senate]
[Pages 13365-13368]
[From the U.S. Government Publishing Office, www.gpo.gov]



   BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2001--
                               Continued

  Mr. WELLSTONE. I say to the majority whip, am I to do my amendment to 
the bankruptcy bill?
  Mr. REID. The Senator is right. I believe the Chair would tell us 
that there is only one amendment to be in order, which is the amendment 
of the Senator from Minnesota. The Senator agreed to an hour time 
limit, it is my understanding. I think the Senator should move forward 
so we can get to the energy bill as soon as possible.


                 Amendment No. 977 To Amendment No. 974

  Mr. WELLSTONE. Mr. President, I send amendment No. 977 to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Minnesota [Mr. Wellstone] proposes an 
     amendment numbered 977 to amendment No. 974.

  Mr. WELLSTONE. Mr. President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To require the General Accounting Office to conduct a study 
    of the effects of the Act on bankruptcy filings, and for other 
                               purposes)

       At the appropriate place, insert the following:

[[Page 13366]]



     SEC. __. STUDY OF THE EFFECT OF THE BANKRUPTCY REFORM ACT OF 
                   2001.

       (a) Study.--The General Accounting Office (in this section 
     referred to as the ``GAO'') shall conduct a study to 
     determine--
       (1) the impact of this Act and the amendments made by this 
     Act on--
       (A) the number of filings under chapter 7 and chapter 13 of 
     title 11, United States Code;
       (B) the number of plan confirmations under chapter 13 of 
     title 11, United States Code, and the number of such plans 
     that are successfully completed; and
       (C) the cost of filing for bankruptcy under chapter 7 and 
     chapter 13 of title 11, United States Code, in each State;
       (2) the effect of the enactment of this Act on--
       (A) the availability and marketing of credit; and
       (B) the price and terms of credit for consumers; and
       (3) the extent to which this Act and the amendments made by 
     this Act impact the ability of debtors below median income to 
     obtain bankruptcy relief.
       (b) Report to Congress.--Not later than 2 years after the 
     effective date of this Act, the GAO shall submit a report to 
     the Congress on the results of the study conducted under 
     subsection (a).
       (c) Data Collection by United States Trustees.--
       (1) In general.--The Director of the Executive Office for 
     United States Trustees shall collect data on the number of 
     reaffirmations by debtors under title 11, United States Code, 
     the identity of the creditors in such reaffirmations, and the 
     type of debt that is reaffirmed.
       (2) Availability.--Periodically, but not less than 
     annually, the Director shall make available to the public the 
     data described in paragraph (1) in such manner as the 
     Director may determine.

  Mr. WELLSTONE. Mr. President, I want to get to the substance of my 
amendment in a moment. I want to respond for a moment to some of the 
comments from my colleague from Utah, Senator Hatch. The Senator from 
Utah said he was going to oppose this amendment because it was a 
``delaying'' amendment.
  I want Senators to know that I offer this amendment in good faith as 
an effort, in a modest way, to improve this bill. It says let's have a 
GAO study and look at the bankruptcy bill and analyze the effect of it. 
I don't know how Senators can vote against this, but I want to make it 
clear that a Senator could file a thousand amendments if this was all 
about delay. To my knowledge, this is the only amendment--my colleague 
from Wisconsin, Senator Feingold, had filed an amendment, but I don't 
think he is going to offer it.
  I just want to be clear that your vote on this amendment is a vote on 
whether or not you think we should be accountable for our vote. That is 
really what it is. So I don't want anybody to say I can vote against 
this amendment because it is some kind of a delaying tactic. That is 
simply not the case. What we have to say to people back in our States 
is: Look, in good conscience, I voted against an amendment to do a 
careful evaluation of this bankruptcy bill to see how it is working. 
You can figure out how you want to fill in the blank. That is the 
argument you have to make. You can't say: I voted against this 
amendment because it was a strategy of delay. That is ridiculous. It is 
just one amendment.
  The second thing I have to do because you have to have a twinkle in 
your eye, and I think the Chair is one of the best at that. I just 
received today a solicitation from MBNA, which I think is the largest 
credit card bank in the country. They offered me a credit line of up to 
$100,000. There is an introductory 1.7-percent annual percentage rate, 
including cash advance. I thank the credit card industry for not taking 
this personally. This is sent to people--to our kids and 
grandchildren--every day.
  This amendment is straightforward. I hope, I say to the Chair, that 
it will garner universal support. It should. It doesn't attempt to undo 
anything the Senate did earlier this year. It doesn't revisit any of 
the debate that we have had. This is no trick.
  Look, if I had my way, I would kill this bill. For 2\1/2\ years, I 
have been trying to do that. This amendment is all about 
accountability. The main provision of the amendment requires that the 
GAO do a study of the impact of the bankruptcy bill on debtors and 
consumers of credit. It is that simple. Both sides have made dramatic 
arguments or dramatic claims about this legislation. In my case, they 
have been negative. In the case of some of my colleagues, they have 
been positive.
  My amendment says, OK, 2 years after this bill has become effective, 
let's have the General Accounting Office give us a report on how things 
have turned out. How in the world--I am amazed that there is 
opposition. There was a great Swedish sociologist, Gunnar Myrdal, who 
wrote, ``Ignorance is never random.'' Sometimes maybe we don't want to 
know what we don't want to know. But I think it is really hard for 
Senators, Democrats and Republicans, to make an argument that you are 
unwilling to let the GAO do a study of this careful policy evaluation. 
That is what this amendment says. Will we be accountable for the votes 
we cast? For those who think it will be a great bill, you will get a 
chance to see. For those who think it is going to be harsh in its 
impact on people, of course, we want to know.
  We are going to ask the GAO to study six things.
  First, we are going to ask the GAO to report on the impact of the 
bill on the number of filings under chapter 7 and chapter 13. This is 
important because the proponents of the bill have been something of a 
moving target on this issue. They argue that the point of the bill--
particularly the means test--is to force more debtors who are now 
filing for chapter 7 into chapter 13--the logic being they can afford 
to do so.
  I have heard colleagues say that is the only thing this is about. 
People should not get away with filing chapter 7 when they really have 
the money and they can instead file for chapter 13. But then the 
American Bankruptcy Institute found that very few people abuse chapter 
7. Perhaps as low as 3 percent do that. And then the chapter 13 
trustees reported that this bill will actually reduce chapter 13 
filings by 20 percent from the current level because of the problem 
through additional burdens that the bill creates for chapter 13 filers.
  Now, the proponents admit there may be fewer successful 13s. Also, I 
have argued that access to both chapters 7 and 13 are going to be 
reduced because of the means test and other burdensome requirements.
  Let's find out. Those of you who say you are for the bill, you say it 
is because people have been gaming the system, but the evidence doesn't 
support that claim. I have talked about who the people are. Fifty 
percent of the people file for bankruptcy because of medical bills, or 
people have lost jobs, or there has been a divorce. But what I am 
saying is, since now we know that, in fact, there may not be so much 
abuse, and that many people can't file successfully for chapter 13, and 
maybe even are less able to do so under this legislation, let's have a 
study. Let's look at this. Two years hence, let's look at how this has 
worked. How can anybody be opposed to a careful policy evaluation?
  Second, the GAO will look at chapter 13 specifically and the impact 
of this act on the number of plan confirmations in chapter 13 and the 
number of chapter 13 plans successfully completed. This is a key 
question because 67 percent of chapter 13 cases fail under current law. 
I will repeat that. Under current law, 67 percent of the people can't 
make it. If this legislation is going to make it even more difficult 
for people to make it, and this is what my colleagues call reform, what 
this amendment says is let's see what has happened. Let's see if I am 
right. Or forget me. Let's see if the U.S. Trustees are right, and if 
we aren't, no harm has been done. But if we are right, then perhaps the 
Congress might want to revisit this legislation.
  When it becomes clear that a lot of hard-working people, through no 
fault of their own, wound up in very difficult, hellish financial 
circumstances, and then could not rebuild their lives because of this 
legislation, don't you think we want to know?
  Colleagues, if you are right, you are right. But if you are wrong, 
you want to know if you are wrong. How can any Senator vote against 
this amendment?
  Third, the General Accounting Office will examine the impact on the 
cost of

[[Page 13367]]

filing chapter 7 and chapter 13 bankruptcies in each State. This is 
another key question--whether or not this bill will allow debtors to 
get bankruptcy relief. There is overwhelming evidence that the cost of 
filing bankruptcy is a major hurdle. Some families are going to have to 
save for months in order to do it.
  They are, after all, insolvent. It is also a virtual certainty that 
this bill will make it more expensive to file, as the Wall Street 
Journal noted earlier this year. Again, let's hold ourselves 
accountable and have the General Accounting Office study this issue for 
certain.
  Fourth, the GAO will report on the impact of the bill on the 
availability and marketing of credit. Something very interesting 
happened in 1999 and 2000 while the proponents of so-called reform were 
bleating about the rising number of bankruptcies. The bean counters in 
the consumer credit industry realized that all these bankruptcies were 
not good for profits so they started lending less money, and they were 
more careful about who they lent the money to and, in fact, overall 
consumer debt level actually declined in 1998, and guess what. We had 
fewer bankruptcies. This trend continued to 1999 and 2000. Bankruptcies 
only started rising again as the economy started to turn downward.
  Several economists have suggested that when you restrict access to 
bankruptcy protection, as this bill does, you are going to increase the 
number of filings and defaults because the banks are going to be more 
willing to lend the money to marginal candidates because they do not 
have to worry about people then filing for bankruptcy. Indeed, it is no 
accident that that is exactly what happened after the bill was passed 
in 1984.
  As the May 21 issue of Business Week notes in an article titled 
``Reform That Could Backfire":

       Indeed, [Mark] Zandi believes that tougher bankruptcy laws 
     will simply induce lenders to ease their standards even more. 
     States with the highest bankruptcy rates already have 
     stringent wage garnishment laws, yet net losses to credit 
     card issuers in such States have been similar to those in 
     States following less restrictive bankruptcy rules.

  Let's see if the experts are right. Have the General Accounting 
Office do a study.
  Fifth, we want to look at the effective so-called reform bill on the 
price and terms of credit for consumers. What we hear by the credit 
card companies and proponents of these bills is that all of these 
bankruptcies have led to higher interest charges and fees for honest 
consumers. That is because, they say, the credit card companies and 
banks pass on the costs of the default to consumers.
  In fact, I remind colleagues, the credit card companies have 
calculated the cost of this tax on consumers to be $400 per year. This 
has been cited as a reason that we need reform. The decent, hard-
working people are getting charged $400 more a year because of people 
who are the slackers and are gaming the system, although there are not 
very many slackers.
  Maybe this is all true, but it only matters in the context of the 
bill if passing this ``reform'' measure actually results in savings to 
consumers.
  By the way, there is not much evidence that is going to happen. 
Consider this: In 1999 and 2000, when bankruptcy rates and defaults 
were dropping sharply, interest rates and fees on credit cards were 
actually rising, and the bank and credit card lender profits were also 
rising. This suggests that if there were any savings, they were not 
passed on to consumers.
  If this industry is going to run the show, let's insist, after this 
bill passes, there are going to be these great savings for consumers. 
Let's just do a careful study of that.
  Sixth, the GAO will investigate the extent to which the bill impacts 
the ability of debtors below median income to obtain bankruptcy relief.
  I have heard colleagues say over and over that nothing in this bill 
will affect the ability of low-income debtors to get a fresh start. In 
fact, I heard the Senator from Alabama make that claim the other day. 
If that is the case and if the only thing this legislation is about is 
going after those people who are the slackers or the cheaters, then 
let's take a look at it.
  As I said before, there are a lot of provisions in this bill that are 
going to make it much harder for people to get a fresh start, and it 
has nothing to do with whether or not they were cheaters or slackers. I 
am talking about the people who have really been put under, no fault of 
their own.
  Let's have the GAO take a look at this question: Are we going to have 
a lot of debtors who are going to face these hurdles to filing 
regardless of their circumstances?
  Finally, there is one other part of this amendment. It directs the 
Director of the Office of U.S. Trustees to collect data on 
reaffirmation agreements, the identity of the creditors in such 
reaffirmations, and the type of debt that is reaffirmed.
  Under this bill, creditors will have more leeway to force 
reaffirmations--agreements where debtors reaffirm their intention to 
pay back the debt and so the debt is not wiped out in bankruptcy. 
Unfortunately, these agreements are commonly abused by creditors under 
current law.
  I talked about what happened with Sears, Roebuck. They paid $498 
million in settlement damages in 1999 and $60 million in fines for 
illegally coercing reaffirmations--agreements with borrowers to repay 
debt--from its cardholders. Apparently this is just the cost of doing 
business. Bankruptcy judges in California, Vermont, and New York have 
claimed that Sears is still up to its old strong-arm tactics but is now 
using legal loopholes to avoid disclosure. This amendment will bring 
some transparency to the reaffirmations and allow us to study how they 
are being abused.
  This is a modest amendment. I have been fighting this bankruptcy bill 
for a long time, and other Senators have been out here fighting. If it 
is going to go to conference committee, then I am going to depend on 
Senator Leahy and others to improve this bill, although I think there 
is going to be a vote we are going to deeply regret.
  The most vulnerable people are the ones who are going to pay the 
price. The economy is turning downward and a lot of people may find 
themselves in terrible circumstances--no fault of their own--and are 
going to have a very difficult time rebuilding their lives.
  I am amazed that the credit card industry in institutional terms--not 
Senator to Senator. Every Senator votes how he or she thinks is right. 
I am saying can we not at least do an evaluation? Can we not at least 
make sure that 2 years from now we have the General Accounting Office 
do a study so we know what is happening around the country?
  If the proponents of this legislation are right and this truly was a 
reform and it truly works well and all of the harsh and negative 
consequences I have spent hours talking about do not turn out to be the 
case, I will be glad to be proven wrong. But for those of you who 
support this legislation, surely you also, first of all, want to be 
right, but if you are wrong and I am right, then you want to know you 
are wrong so you can change the course of policy. You do not want to 
see a lot of innocent people, ordinary citizens hurt by this 
legislation just because the large financial service industry has such 
clout. We all know about their power. We all know that this is one-
sided.
  There is not a word in this legislation--I am sorry, on the Senate 
side, there is a minuscule piece on disclosure, but nowhere are they 
called into question or called into accountability. They pump this 
stuff out every day. I got one today. Credit line up to $100,000. Our 
children get it. Every day they send this stuff out in the mail. Every 
day they try to hook people on their credit, and we are arguing that 
when it comes to bankruptcy, the only people who are at fault are the 
people who wind up in trouble, not these big credit card companies for 
their irresponsible, reckless lending policies.
  Shouldn't we call on them to be more accountable? We have not. 
Shouldn't there be more balance to this legislation? There is not. Am I 
right that a lot of low- and moderate-income people

[[Page 13368]]

are going to be hurt, that a lot of single-parent families headed by 
women are going to be hurt? Am I right that a lot of children who live 
in these families are going to be hurt? Am I right that a lot of 
families who have been put under because of medical bills are going to 
be hurt? Am I right that families--because the husband or the wife, the 
major wage earner, loses his or her job and finds themselves in 
terrible circumstances--are going to be hurt?
  I think I am right. If I am wrong, I will be prayerfully thankful to 
be wrong. If I am right and you are wrong, you will want to know you 
are wrong so we can do something in a hurry before a whole lot of 
ordinary citizens get hurt very badly by this legislation.
  Every Senator should vote for this amendment. There is no reason to 
vote no.
  I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second? There is a 
sufficient second.
  The yeas and nays were ordered.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, I ask unanimous consent that we leave the 
bankruptcy legislation now before the Senate until the hour of 3:20, at 
which time we expect Senator Hatch to return and speak on the amendment 
of the Senator from Minnesota. Senator Domenici and I would like to go 
to the energy and water bill during this short period of time.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DOMENICI. Mr. President, I ask unanimous consent the order for 
the quorum call be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from New Mexico is recognized.
  Mr. DOMENICI. I thank the Chair.
  (The remarks of Mr. Domenici pertaining to the introduction of S. 
1186 are located in today's Record under ``Statements on Introduced 
Bills and Joint Resolutions.'')
  Mr. DOMENICI. I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Ms. STABENOW. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________